Proposed rules sparked by the financial industry meltdown of 2008 could have the effect of clamping down credit so hard that lower-income buyers and many others would be shut out of the mortgage market, critics say.
The critics, including an unlikely coalition of mortgage lenders, consumer advocates, housing industry officials and lawmakers, say regulators have gone too far in their effort to prevent a repeat of the reckless and fraudulent lending that brought the nation's economy to its knees.
Opponents argue that the new rules, proposed by a bevy of federal regulators, could have the unintended consequence of restricting the American dream of homeownership to the wealthy, leaving behind many creditworthy buyers and shrinking the pool of home buyers just as the housing market is struggling to regain its footing.
More must-read stories AP Chat home finances with TODAY Money's Allison Linn now! Updated 72 minutes ago 6/8/2011 3:49:55 PM +00:00 She's discussing cutting down household expenses. And we also want to hear from you — what are you tips and tricks? What do you make at home or buy in bulk so you don’t have to pay full price? Life Inc.: America is skipping breakfast cereal Your Career: A nation with paid sick leave Life Inc.: India turns focus to environment What homebuyers can get for $300,000 "If this rule goes through as it stands, the demographic of borrowers who get (favorable rates) will be white and wealthy," said David Stevens, chief executive officer of the Mortgage Bankers Association and former commissioner of the Federal Housing Administration. "African-American, Latino and first-time home buyers will be charged higher prices."
Stevens was commenting on 376 pages of proposed rules for "Qualified Residential Mortgages," which would require a 20 percent down payment and limit a borrower's debt payments to no more than about one-third of income.
Critics say the rules would force up the borrowing costs for lower-income and younger borrowers because lenders would charge higher rates for loans that do not qualify for QRM status. They say that could sideline millions of potential first-time buyers who haven't saved the full 20 percent — and hurt the prospects of the 11 million current homeowners who owe more than their home is worth.
The rules are intended to reduce the number of risky loans by requiring that lenders hold onto 5 percent of any loans that do not qualify for QRM standards. Loans that meet the standards could be sold fully into the secondary market, which is normal practice for most mortgage lenders.
It was this lack of "risk retention" that led to the surge of risky lending that has helped trigger millions of foreclosures and sent home prices tumbling, according to Sheila Bair, head of the Federal Deposit Insurance Corp.
"The fact that securitizers did not have skin in the game with these loans, by and large, or meaningful skin in the game, led to a lot of the lax underwriting and abuses that we saw in the mortgage markets," Bair told the House Financial Services Committee last month.
But others say the regulators are swinging the pendulum too far.
Advertise | AdChoices"I think everyone in the industry agrees that you've got to have some skin in the game," said Cameron Findley, chief economist at LendingTree.com. "The what question is: How much skin in the game do you want to have? And how do you balance that with the size of the hole so many homeowners are in today?"
The proposed rules are opposed by a long list of groups that don't often align on financial regulation matters, including the Mortgage Bankers Association, the Center for Responsible Lending and the National Community Reinvestment Coalition.
Critics fear the new standards will create a two-tiered mortgage market in which a borrower with enough money to afford the higher down payment would pay less, compared with an equally creditworthy borrower with a smaller savings account. A recent report by J.P. Morgan estimates the gap could amount to as much as 3 percentage points, which could mean the difference between an affordable monthly mortgage payment and continuing to rent.
The new rules also would hit families harder in high-cost markets. Based on current average prices, for example, buyers in the Northeast would have to come up with $53,000 for a 20 percent down payment on a typical existing home, compared with $33,000 for a typical home in the Midwest.
The rules have also focused renewed attention on the fate of government-controlled mortgage entities, including Fannie Mae and Freddie Mac, and the FHA.
The proposed QRM guidelines would not apply to those agencies, which currently back some 90 percent of all new mortgages. That could further complicate the shared goal of Congress and the White House to wind down government-backed mortgage finance and restore the flow of private capital.
"It's going to force FHA to get huge, because all small down payment loans will go to FHA; there won't be any low down payment finance other than them," said Stevens, the former FHA commissioner. "So they'll still be a huge source of funds for all low down payment loans, 100 percent-backed by the government with no private capital competing."
The new rules are being proposed jointly by six federal regulators: the Federal Reserve, the Department of Housing and Urban Development, the FDIC, the Federal Housing Finance Authority, the Office of the Controller of the Currency, and the Securities and Exchange Commission. The regulators all declined to comment on the widespread opposition, saying they were unable to do so while the official rulemaking comment process is still under way.
But in a sign the regulators have heard the protests, the agencies issued a joint statement Tuesday extending the comment period — originally set to end this Friday — until Aug. 1 "to allow interested persons more time to analyze the issues and prepare their comments."
An analysis by the National Community Reinvestment Coalition found little correlation between size of down payment and default rates. Based on a review of 1 million loans written for the most creditworthy borrowers in 2006 and 2007,the default rate ranged from 0.14 percent for those with a 20 percent down payment to 0.26 percent for those who put just 3 percent down.
"It's still a very acceptable level of default," said John Taylor, president of the NCRC, which advocates for access to banking services. "The industry would be very happy with it."
Advertise | AdChoicesThe default rate for all mortgages outstanding was 8.32 percent at the end of the first quarter of 2011, according to the Mortgage Bankers Association.
Another analysis by LendingTree.com found that of mortgage loans written from 1997 through 2009, roughly 80 percent would not have met the QRM standards.
Critics of the new standards argue that the current high default rate was mostly the result of a wave of predatory lending and exotic loans — from artificially low "interest only" payments to "no documentation" loans that relied entirely on a credit score to assess the risk of default.
There's widespread agreement on the need to better assess the risk of default. But opponents of the new standards say they pose an even bigger risk. If too many borrowers are denied mortgages, the already weak housing market would be further crippled by a dearth of new buyers.
"The concern is they decide to rent for the next five years," said Findley. "So they're not buying, and home prices are going to continue to fall."
Falling home prices have already cut deeply into a key segment of the housing market — the "move-up" buyer that includes growing households who have accumulated equity in their first home. Falling home prices have already erased trillions of dollars of home equity, making it harder to come up with a down payment of any size. The proposed 20 percent down requirement could further shrink that pool of buyers, sending house prices falling further.
"If we exacerbate that by having credit restricted, and the private sector is wary about jumping in, and house prices continue to fall, more homeowners are underwater, putting more pressure on bank balance sheets, it really could tip the scales in a way that would be very dangerous," said Christopher Hebert, research director at the Joint Center for Housing Studies at Harvard University.
"Qualified Residential Mortgages," which would require a 20 percent down payment and limit a borrower's debt payments to no more than about one-third of income.
Ну им же надо как то средний клас добить..........клёва, скоро все будут жить в ренте и сосать лапку..........ну как будеш голосовать за Обаму, а Реина?
Обама предложил сей закон или Президенты у нас нынче законы продвигают? Не прикидывайся дурачком чтобы лишний раз выразить свою неприязнь к Обаме.
"If this rule goes through as it stands, the demographic of borrowers who get (favorable rates) will be white and wealthy," said David Stevens, chief executive officer of the Mortgage Bankers Association and former commissioner of the Federal Housing Administration. "African-American, Latino and first-time home buyers will be charged higher prices."
How does this sound like anything democratic and Obama-like to you???
А как же. Или ты всерьёз думаеш што етот гибрид всерьёз печоца о голодранцах? Они просто инструмент в достижении главной цели, уничтожении среднева класса и воцарения власти ЕЛИТ (тоесть чиновникафф всех мастей и супер богатых)
Демократическая идея давно выхолостилась в рядах Дем. партии..........всё за сдхто они боряца - абсолютная власть для установления СССР лайк государства с одной НЕСМЕНЯЕМОЙ партией у власти...........они ето и не скрывают.
Ты хочешь сказать, что если бы закон или предложение о законе каким-то образом привилегировало бедных и черных ты бы за это на Обаму не напрыгнул при этом прекрасно зная, что законы выдвигает конгресс?
Ныгга, плиз! Тебе только дай причину, а оправдание ей ты сам придумаешь.
Реина читай внимательно. Маркс, Ленин и прочие им пофигу, их интересует ВЛАСТЬ, причом постояннная, абсолютная, не збалансированная ничем власть. Для етава надо последовательно убрать с пути демократические институты, убить средний клас и подменить выборы фарсом. Все 3 условия с успехом выполняюца прямо сейчас.
Ну достигнут они свою власть...люди дураки не продвинутые типа станут слушать всяких Ленинов и Макрсов....как ты себе это все представляешь? Или ты забыл в каком времени мы живем?
гр. все смешно или что-то в частности, а то если все, могу палчик показать.
.как ты себе это все представляешь? Или ты забыл в каком времени мы живем? (ц)
НУ ты как маленькая ей Б-у Реина, при чом сдесь время? или ты всерьёз думаеш што человек далеко ушол в своём развитии от каменнава века? Всё дело в умело построенной пропаганде и правильно выстроенном образе врага..........а люди.......бараны. Ты отними у них ВСЁ И СРАЗУ на годик, два......а патом дай чуть чуть, и они тебе ноги будут мыть и воду пить.........так уже было и не раз и не два в истории.
My opinion, if Obama would like to get elected for the next term, he will not agree with this proposal, because blacks and minorities will not vote for him at all. His rating is down anyway because of the 9% unemployment already. If he and congress does not fix the housing sector structure soon, the economy will not improve within next 5-10 years.
>>which would require a 20 percent down payment and limit a borrower's debt payments to no more than about one-third of income. (c)
А я согласен, помоему верно. 20% - минималный индикатор того что семья таки в состоянии менеджить деньги, а правило 1/3 одтверждает то, что они таки их еще умеют и зарабатывать.
я не смелый - я чесный........вижу крысу и называю её крысой. а нащот медалей ето ты к своему лизуну обратись, он всегда готов получить ещо и ещо виртуальных медалек............но тока после таво как со своей охраной разберёца........... ппц, парень савсем поехал мозгом бедненький.
Вовремя? Ты вообще где последние пару лет была? У нас тут, в США, ваащето жуткий обвал жилищного рынка, как раз по причине неплатежа и повальных банкротств. Кетч ап он зы нюз.
согласен с Реиной, рамки слишком жосткие, слишком многим они убьют надежду хоть когда нибудь заиметь своё жильё, особенно ето отразица на многодетных. У людей пропадёт стимул ибо они будут знать што НИКОГДА не заработают на дом........со всеми вытекающими..........и вообще ето не по американски........а очень по совецки.
Обвалом была причина (одна из) стейтед инком програм с которыми я не согласна. А при проверке документов такие жесткие параметры никчему. А повальные форкложеры, шортсейлы, итд с недавнего времени (год где-то) становяться стратегическими и процент таких стратегических ситуаций растет потому-что люди просто не видят другого выхода.
>>.и вообще ето не по американски........а очень по совецки. (Дед)
Как раз наоборот. По совецки - раздавать всем подряд, что и привело к кризису. 20% не так много, я бы скзал очень божеская цифра, минимальная даже. Протягивать ножки нужно по одежке.
Именно их отсутствие и привело к кризису, все эти "зеро даунпеймент" и негатив амортизейшн. Странно как вы не видите очевидной связи, вроде причины уже давно выяснены и обговорены.
Почему нельзя просто обязать лоан офисерс, тщательнее проверять доки? почему нужно всё всегда перекладывать на консюмеров? и почему ко всем нужно подходить с одной меркой? Ненавижу уравниловку.
все эти ъзеро даунпейментъ и негатив амортизейшн (ц)
согласен што ето был екстрим...........но за каким же хреном нада из аднаво екстрима кидаца в другой? почему нельзя разработать нешто более гибкое, ориентированное на человека а не на банковскую машину?
The same happenned in the 80's, where interest rate was 18% and 20% downpayment was a norm. But, if you see it now- 20% on the $200,000. house is $40,000.00 It will take an average family at least almost 10 years to save (if they put away around $300.00 a month). And with rising prices for gas and food and unemployment, most people are not able to put away so much per month- they are just living from pay check to pay check.......
Какие, какие доки? Разве есть такой док типа '100% Warranty of guaranteed payments"? Гы, нету конешно...Зато 20% как раз и играют роль этого иншуренса, типа перестал платить -> потерял дом -> потерял и свои бабки в даунпейменте. Именно так и было когда я покупал свою первую проперти в 2000-м, ниже 20% никто даже говорить не хотел. И так было всегда, и как результат - небыло никаких кризисов с домами.
>>$40,000.00 It will take an average family at least almost 10 years to save (ц)
Ха-ха, 40К за 10 лет, это 4К в год, $300 в месяц, это все что они могут отложить??!!! Извините, но стакими доходами/сбережениеми дом за $200,000 - дикая утопия круче сюжета "Аватара". И чем они его платить будут, плюс налоги, плюс ютилитиз, плюс мейтенанас, плюс иншуренс если у них ВСЕГО есть $300 в месяц? Все это похоже на сициалистические лозунги, каждому бедьняку по лексусу, угу...
►E.◄Вот и славно, 20% в даун серьезно понижает месячный пеймет вопрос а могу ли многие сейчас набрать 20% плюс страховка,ассетмент и баснословные налоги.Сейчас многие склоняються к ренту и в среднем в большом Чикаго рент поднялся примерно на 20% закон свободного рынка запрос определяет деньги
Как виш одни от этого одни приимущества. (E.) -------------------------- Про преимущества ты мне расскажешь когда твои дети самотоятельно (без твоей помощи) накопят $40,000.
20% от $200,000 с утра было $40,000, так шо не надо. Манипулировали, а точнее округлили те, кто сказал что если откладывать по $300 в месяц, то копить нужно 10 лет.
ппц, парень савсем поехал мозгом бедненький.